St. Louis apartment market leads nation

ST. LOUIS — The St. Louis-area apartment market has long had a reputation for stability, where wild swings in rents and vacancy levels are rare. Now, an annual survey conducted by a local accounting firm offers fresh evidence to support that point.

While the area vacancy rate rose in 2002, it remains lower than the rest of the nation. Local landlords' profit margins fell, but rents barely budged.

"I think the real key (to the survey) is that St. Louis continues to outpace the nation in the market, both in terms of occupancy and the amount of investments that we're seeing in multi-family projects locally," said Bryan Keller, partner in charge of the real-estate services group at Rubin, Brown, Gornstein & Co., based in Clayton.

For the last five years, RBG has surveyed the local apartment scene, along with other markets around the United States. The 2002 survey was based on data from 25 states.

Over the five years, the average monthly rent in this area for non-subsidized housing grew at single-digit rates annually. From 2001 to 2002, the average rent rose to $595 a month from $583 in the St. Louis market, which includes the Metro East. Vacancy rates grew to 12.8 percent from 5.8 percent, but they still lagged the rest of the nation, where apartment vacancies hit 13.7 percent in 2002.

"We don't experience the significant booms when things get good, and we're fortunate enough not to experience the big busts," Keller said.

Nationally, decreasing home-mortgage rates have taken a toll on the apartment industry, he said. "Interest rates are so low, they're pulling rents into the first-time home [buyers] market," he said.

That has especially been true in western St. Louis County and in St. Charles County, said Stan McCurdy, a partner at MLP Investments, a real-estate development company in Frontenac. Residential development in those areas is dominated by single-family-home subdivisions.

"I don't know that there's much demand to build [apartments in those areas] anymore," McCurdy said.

MLP is concentrating on "in-fill" projects: developments in older, established communities.

"It's definitely a lot more work than green field development opportunities," Land said. "In most cases, it's a lot more expensive. There's more demolition and land assemblage."

But renters are flocking to such apartments and are willing to pay higher rents for them.

"If it wasn't worthwhile, we and our friendly competitors wouldn't be doing it," Land said.

Also hot, said Keller, are renovations of historic properties in the city of St. Louis, driven both by demand and by tax credits that help improve the bottom line for developers.

"It's primarily single people and empty-nesters who are gobbling it up," Keller said. "There's some good momentum at different price points."

The Metro East also could be due for a resurgence, Keller said, particularly in and around O'Fallon, Ill.

In fact, Balke Brown Associates of St. Louis picked a 240-unit apartment project there, Green Mount Lakes, for its first residential project in more than a decade.

"The demographics are really good," said Don Land, senior vice president for Balke Brown. "It's close to Scott Air Force Base, which is a huge employer. And there were really no new, high-quality apartment properties in the area. We saw it as underserved."

In a sign of changes in the broader apartment market, Balke Brown has started a couple of other projects, including 200 new loft-style apartments near Forest Park.

"The commercial market has been very soft the last couple of years, and residential has held its own," Land said. "It helps diversify the base of our company, instead of just focusing on office and industrial."

Apartment developers, Keller said, are buoyed by relatively stable profit margins in the St. Louis area. He expects that will continue, especially if developers refrain from over-building.